R3 critical of inclusion of partial licences in Deregulation Bill

INSOLVENCY TRADE BODY R3 has accused the government of undermining its own attempts to simplify insolvencies by introducing partial licences for practitioners.

As part of the Red Tape Challenge, which aims to cut regulation, insolvency practitioners (IPs) will be offered greater use of digital communication, rather than the current letter format which they are mandated to use.

Other reforms, which were announced on 23 January, include scrapping the requirement for IPs to apply for a court order to extend an administration past 12 months and reducing record keeping for internal purposes.

"When businesses do enter the stage of insolvency we need to make sure that the process is as smooth and straightforward as possible. One way of doing this is cutting burdensome red tape which makes insolvency proceedings less complicated and troublesome,"said business minister Jenny Willott.

R3 welcomed the initiative, which could save the profession and creditors £30m a year, but said there was no clear date of when it would be implemented.

"We are still awaiting the full detail of how the government is proposing to make their changes, but what we have heard so far is a good start," said R3 vice president Giles Frampton (pictured).

However, the trade body warned that partial licences for IPs, introduced as part of a Deregulation Bill at a parliamentary reading on the same day, will confuse the insolvency process. This will see practitioners able to receive a partial licence of a specialism in either personal or corporate insolvency - a move R3 said will complicate turnaround advice.

"Partial licences could prove confusing for the businesses, individuals, and entrepreneurs that turn to IPs for advice. They need to know from the start that an IP will be able to help with all their problems," said Frampton.

A consultation on partial licences was launched on the same day as the parliamentary reading but it is already included in the Deregulation Bill, which is due to receive its second parliamentary reading on 3 February.

"These proposals have yet to be properly consulted on, so it is disappointing to see them already in the Bill," said Frampton. "Hopefully, the government will listen to the profession and amend the Bill once the consultation is complete."

According to R3, the government has issued it with a letter in which it has to respond with its comments on the Bill by 21 February.